F A L L F O R U M 2 0 1 2 Copyright 2012 Family Wealth
Alliance, LLC. All rights reserved. REPORT ON THE FIFTH ANNUAL
SINGLE-FAMILY OFFICE STUDY
Slide 2
2 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. DODD-FRANK UNCERTAINTY CLEARS AS REGULATION GOES INTO
EFFECT COMPLIANCE COSTS HIT MANY SINGLE-FAMILY OFFICES IN THE
POCKETBOOK SFO Study Headliners - I
Slide 3
3 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. SUSTAINABILITY GROWS AS A MAJOR CONCERN GENERATIONAL
TRANSITIONS, POOR INVESTMENT RETURNS, FAMILY COHESION AMONG
CONTRIBUTING FACTORS SFO Study Headliners - II
Slide 4
4 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. SFO Study at a Glance - I 34 SFOs Participating vs. 44
Last Year Median Assets Under Supervision = $320 Million Mean
Assets Under Supervision = $450 Million Change in Assets from 2010
= 0.5% Range in Assets = $20 Million to $1.8 Billion
Slide 5
5 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. SFO Study at a Glance - II Median Households Served = 16
Total Households of All Participants = 544 Range in Generations
Served = 1-5 Mean Years in Existence = 28 CEO at 47% Is Family
Member
Slide 6
6 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Highlights of Research Uncertainty over Dodd-Frank
ClearsMostly Concern Over Sustainability Continues to Grow No. 1
Challenge: Generational, SFO Transitions Yet Only 38.2% Have
Succession Plans in Place No. 2 Challenge: Investment Returns Were
Looking at Rising Costs & Shrinking Assets Use of Security
Consultants Gains Traction
Slide 7
7 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Aftermath of Dodd-Frank
Slide 8
8 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Dodd-Frank Background Law Abolished Private Advisor
Exemption SEC Defined New Family Office Exemption First Legal
Definition of a Family Office Only Family Clients, Only Family
Owners New Rules Took Effect March 30, 2012 Implied Recordkeeping
Duties Not Clear
Slide 9
9 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Qualified for Exemption Which Most Closely Describes?
Qualified for Exemption Without Changes Made Changes and Was Able
to Qualify Decided to Outsource Investment Function Registered with
SEC or State as RIA Has Legal Advice but Has Taken No Action
Remains Uncertain about Legal Status 64.5% 16.1 0.0 6.5 3.2
9.7
Slide 10
10 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Legal Costs Involved? Did You Incur Expenses (e.g. Legal
Fees, Consulting Fees) Related to Complying with Dodd-Frank Rules?
Yes38.2% If Yes, Please Estimate Total Expenses Ranges of Costs
Cited:$300 to $450,000 Mean Cost Cited:$64,000
Slide 11
11 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Top Challenges for SFOs - I Relative Score 2012 2011 2010
Generational Transition100 100 37 Investments 95 76 100 Managing
the Family Office 79 61 17 Family Cohesion Governance 50 51 33
Slide 12
12 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Top Challenges for SFOs - II Relative Score 2012 2011
2010 Preserving Wealth 29 39 27 Liquidity, Cash Management 19 37 20
Consolidation Rep., Tech. 19 37 27 Rel. Mgt., Client Expect. 10 35
20 Compliance, Reg. Concerns 5 8 57
Slide 13
13 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Concern about Sustainability 2012201120102009 Somewhat
Concerned47.132.640.644.1 Very Concerned26.523.212.514.7
Total73.655.853.158.8 (in %s)
Slide 14
Rising Concerns: Sustainability Copyright 2012 Family Wealth
Alliance, LLC. All rights reserved. 14
Slide 15
15 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Strengthening the Family Office Establishing Family
Communications and Meetings Establishing Family Web Site and
Communications Network Added G4 Members and Outsiders to Board
Partnering with Other Families Considering a Minimum Annual Fee per
Household New Services Include Tax Planning and Cash
Management
Slide 16
16 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Strengthening the Family Office Improved Reporting to
Give Family the Big Picture Established a Succession Plan for CEO,
Board Developed a 5-Year Business & Strategic Plan Nothing,
Really; G-1 Reluctant to Share Control Hired Consultant to
Facilitate Family Meetings Enhanced Family Communications &
Meetings
Slide 17
17 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Succession Issues 47.1% Of Chief Executives Are Family
Members Average Tenure of Participating CEOs 14 Years Years
Remaining Until CEO Retires Only 38.2% Have Succession Plan for
CEO
Slide 18
18 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Expected Rates of Change 20122011 2010
Substantially55.9%51.2% 54.5% Only Slightly38.234.9 30.3 Remain the
Same5.914.0 15.2
Slide 19
19 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Changes in Recent Years Successful Leadership Transition
to G-2 Outsourced All Investment and Legal Matters Transitioned to
Private Trust Co. Structure Fewer, More Customized Services Fewer
Households Being Served Separated from Operating Business
Slide 20
20 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Confidence as a Fiduciary 20122011 2010 Fully
Confident71.9%65.9% 78.8% Somewhat Confident21.919.5 15.2 Somewhat
Unconfident3.112.2 6.1 Not Confident At All3.12.4 -0-
Slide 21
21 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Asset Growth Rates For Rolling 3-Year Periods Ending
20112010 2009 Mean Asset Growth6.77%6.24% 0.41% For Rolling 3-Year
Periods Ending 20112010 2009 Mean Asset Size$541$593 $561 ( In $
Millions)
Slide 22
22 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Investment Expertise Have Sufficient Expertise In-House?
2012 2011 2010 Yes66.7%68.2% 81.8% Employ External (Outsourced)
CIO? 20122011 2010 Yes35.3%31.8% 36.4%
Slide 23
Use of External CIOs: Middle Tiers Most Eager Yes, wed like
some help! 23 Copyright 2012 Family Wealth Alliance, LLC. All
rights reserved. Lack Expertise Employ Ext. CIO
Slide 24
24 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Investment Discretion What Is Your Arrangement with
External CIO in Regard to Investment Discretion? No Investment
Discretion77.8% Limited Discretion11.1 Full Investment
Discretion11.1 How Long Employed? 12 Years (Mean)
Slide 25
25 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. Investment Policy Changes Emphasis on Capital
Preservation, Diversification Giving More Priority to Short-Term
Liquidity Lowering Overall Risk Profiles of Portfolios Focusing on
Individual Risk Profiles and Tolerances Exiting when Possible from
Most Hedge Funds Eliminated Funds of Funds from All Portfolios More
Active Management, Emerging Markets
Slide 26
26 Copyright 2012 Family Wealth Alliance, LLC. All rights
reserved. CEO Compensation Base Salary Total Tier Assets (Mean)
(Mean) I $1B+ $674K $1,650K II $0.5B-$1B 397 454 III $100M-$0.5B
275 380 IV